The Russell 2000 yesterday fell hard into the close with no clear catalyst. It might have been just profit taking as the market was anyway getting more and more overstretched. The only notable economic release was the US Consumer Confidence report where the data beat across the board. We are now close to the Christmas holidays and liquidity is likely to get thinner which increases the risk of bigger swings. Today the market will focus on the US Jobless Claims figures as the labour market continues to be a key spot to watch for the soft-landing narrative.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 probed a bit above the key resistance zone around the 2020 level but got smacked back down soon after. The sellers piled in with a defined risk above the resistance to target a pullback into the 1920 support zone. That’s also where we can expect the buyers to step in again as they will also find the red 21 moving average for confluence.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have some more confluence around the 1920 support as we can find the trendline, the 61.8% Fibonacci retracement level and the red 21 moving average. That’s where the buyers are likely to pile in and target the break above the 2020 resistance with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and increase the bearish bets into the 1820 support.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action and we can notice that the latest leg higher diverged with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if the price breaks below the recent swing low at 1975, we would get a confirmation of a reversal and the Russell 2000 is likely to extend the drop into the 1920 support zone.
